The UNTHINKABLE is About to Happen to Stocks
Summary
Felix contends that the traditional "buy and hold" investment strategy is no longer effective in today's fast-paced market, especially for individual stocks or sector-specific ETFs. He highlights that Wall Street now prioritizes momentum over fundamental quality, causing capital to rotate rapidly between sectors. Felix points out a significant discrepancy: while the NASDAQ 100 has surged 70% in two years, many large, profitable software tech stocks have declined by about 8% during the same period. He attributes this to a dominant Wall Street narrative suggesting AI will render software companies obsolete, leading hedge funds to bet billions against them.
Felix introduces his "rubber band effect" framework, explaining that extreme crowding on one side of a trade (e.g., massive shorting of software stocks) creates immense pressure, making a violent snap-back in the opposite direction highly probable. This snap-back is often triggered by "forced buying" as short sellers are compelled to cover their positions when prices start rising. He suggests a three-step process to identify such opportunities: assessing market positioning (how crowded one side is), looking for "cracks" (price breaking key resistance levels), and anticipating the "force buying" phase. He uses the example of Avis's short squeeze to illustrate this potential. Felix also mentions an upcoming free live workshop on "How to turn the IPO summer into a five-year wealth machine" to teach these skills in detail.
Mentioned Stocks
Reasoning: Felix is "very interested in potentially buying this" and presents it as the "simplest way" to play the opportunity in software. The IGV ETF tracks 110 leading software companies. He argues that fears of AI killing software are overblown, as enterprise subscriptions are sticky. The chart shows it's been hammered but is now "bouncing off" its 50-day moving average, finding support after previous lows around $74.
Reasoning: Felix likes Commvault Systems because it's a cyber resilience and data protection company, crucial for protecting data that AI runs on, especially with increasing cyber attacks. It generates over $1 billion in revenue, grows at 19% annually, has enterprise clients, and has recently made an AI data security acquisition. Spending on cybersecurity is non-negotiable for businesses. The stock is down about 60% but shows signs of recovery with "big institutional buying" and consistently "higher lows."
Reasoning: Expensify is a speculative play for Felix, currently trading at "a dollar in a bit" after plummeting 97% from its peak of $50. Despite this, it's cash-generating, and management is buying back shares ($25 million buyback), indicating belief in its value. The company has integrated AI into its expense management platform. Felix notes the chart appears to be "bottoming out" with "higher and higher" lows and institutional buying, suggesting high short interest could lead to a rapid squeeze.
Reasoning: Felix identifies Mara Holdings (formerly Marathon Digital) as the "biggest short squeeze candidate" with over a quarter of its shares shorted. The company is pivoting from Bitcoin mining to energy infrastructure and AI data center capacity, acquiring Longridge Energy. Despite being down 83% from its top, this transformation, coupled with high short interest, could trigger forced buying if Bitcoin rallies or AI infrastructure gains attention. The chart shows a "sort of bottoming out" pattern, including an "inverse head and shoulder," with increasing lows.